(March 28, 2011) While the world focuses on the nuclear crisis in Japan, China is contemplating a rapid expansion of its nuclear energy capacity. China currently has 13 operating nuclear reactors, 27 under construction, 50 planned, and 100 more proposed. By 2020, the country’s nuclear capacity is expected to increase ten-fold. The Chinese government reacted to the crisis in Japan by announcing a moratorium on nuclear project approvals, pending a review of their nuclear safety plans.
Here is a rundown of the political fallout of the Fukushima meltdown on China’s energy policy.
Chinese Nuclear Policy
Despite the fact that China announced a moratorium on nuclear project approvals, many critics doubt the Chinese government will alter its course, especially as they are expected to break ground in April on a nuclear project that was approved before the moratorium.
Nuclear Safety in China
Much of China is susceptible to large earthquakes, and the Chinese government is known to cut corners with infrastructure projects. Should we be concerned?
While no one is sure whether China will be impacted by radiation from the Japanese nuclear fallout, Chinese citizens are in panic mode.
Nuclear Liability in China
Unlike virtually every other industry in countries with nuclear power reactors, operators and suppliers to the nuclear industry enjoy either complete exemption from financial liability or limited liability. Because the potential harm that a nuclear accident can cause is so great, nuclear power facilities are uninsurable. So, to ensure that nuclear power stations are built, governments around the world have absolved the nuclear industry of the potentially catastrophic financial consequences of an accident. This amounts to a massive subsidy to an inherently dangerous technology and insulates the nuclear industry from the risks it creates for society.
China is no exception. China caps liability for nuclear facilities at roughly US$160 million, nowhere near enough to cover a nuclear disaster. According to one estimate, the Japanese government could end up spending 1 trillion yen (US$12 billion) to compensate businesses and individuals for damages resulting from the Fukushima disaster.
If such an accident were to occur in China, compensation would be paid by Chinese taxpayers and not by negligent companies or individuals, creating a problem of moral hazard and undue risk-taking by nuclear operators and officials. (“Moral hazard” refers to people’s increased incentives to take risks when insured.)